The Global Economy Grinding Down

By Roger Baker

A 42 gallon barrel of crude oil yields 19 gallons of gasoline but only 10 gallons of diesel. Yet diesel (distillate) is expected to move all trains, planes, and trucks while also heating New England during the winter. Plus moving all the trucks and planes in China, and everywhere else too, plus many of the cars in Europe. Without enough gasoline, US drivers are greatly annoyed, but without enough diesel the global economy shuts down really fast.

With consumer spending now falling due to gas prices, this diesel bottleneck situation dictates cost-push inflation in the material necessity sectors of the economy like transported food (steel costs are rising sharply too). But meanwhile, simultaneous deflation in the discretionary spending sectors like cable TV and services.

Read "Soaring Fuel Prices Take a Withering Toll on Truckers" in the New York Times

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